>> But banks in the United States normally operate with a reserve requirement of only 10%

The banks are legally allowed to do that, Tether wasn't. According to the lawsuit at some point they started declining buying back USDT, due to the lack of real dollars in their bank account. That's clearly a fraud, since they were assuring their customers they have sufficient reserves.

Also, the reason they were at some point missing $850M was because that money was seized in various countries as coming from drug cartels. Seems like there's a lot of rope to hang them with.